At press time, President Barack Obama was set to sign into law a bipartisan bill relieving homeowners living in flood-prone neighborhoods from big increases in their insurance bills.
The legislation – H.R. 3370, the “Homeowner Flood Insurance Affordability Act of 2013” by Sen. Bob Menendez (D-N.J.) and Rep. Michael Grimm (R-N.Y.) – reverses much of a 2012 overhaul of the flood insurance program after angry homeowners facing sharp premium hikes protested.
But by reversing the reforms of Biggert-Waters Flood Insurance Reform Act of 2012 Congress has again kicked the debt can down the road. And there’s no denying that the National Flood Insurance Program (NFIP) is in debt – $25 billion in debt.
The Menendez-Grimm bill restores “grandfathering” of policies located in communities with new flood maps. It also reinstates subsidies for pre-Flood Insurance Rate Map (pre-FIRM) properties that are bought and sold.
According to the Congressional Budget Office, the bill would not add to the $25 billion debt of the NFIP and would pay for itself through annual reserve fund assessments of $25 a year for primary residences and $250 a year for businesses and vacation homes.
Realtors, homebuilders and lenders generally supported the legislation to unwind Biggert-Waters while some environmental and taxpayer groups opposed it.
The insurance industry was split over it.
The National Association of Mutual Insurance Companies (NAMIC) has called the bill an unnecessary “overreaction.” However, the measure was supported by independent agents.
“The startling pace with which Congress acted in order to fix the unintended effects of these two provisions in Biggert-Waters, itself less than two years old, should be commended,” said Charles Symington, Big “I” (Independent Insurance Agents and Brokers of America) senior vice president for external and government affairs.
Maybe Biggert-Waters was not the best way to address the problems with the NFIP. Maybe it went too far, and too fast, in eliminating too many subsidies for too many property owners. Pulling that financial support could devastate some families, communities and real estate markets.
But Congress did not have to completely drown the reforms.
It’s like Congress just threw up its hands and decided the problems weren’t worth fixing. There could have been a moderate solution that retained important reforms and improvements while targeting financial assistance to those in financial need rather than throwing the baby out with the flood waters.